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Joint Ventures that Deliver Success

Ensuring Success - JVs that Deliver

The following is a ‘Check List’ jointly published with CriticalEye in 2009.

Organizational Edge is a business psychology consultancy that focuses on the commercial needs of its clients and brings a clear understanding and application of the human dimension to ensure that success is achieved.  Charles Sutton is the Senior Partner at OE and has had considerable experience of JVs, M&As, alliances and major projects.

In all cases there is often a belief amongst senior executives that once the deal is struck, the champagne consumed, and the business plan agreed that the most significant act has been completed.  Here, Charles suggests that this is simply the first phase and the real work is about to begin.  With a special focus on Independent Joint Ventures, Charles offers a Check List of critical activities that will enable the JV to deliver against objectives.

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Questions of Governance and Leadership

  • Have you established a clear governance and leadership structure?  The JV leadership team members are not representatives of the parents.  Their role is to lead the JV.  Beyond the leadership team, there will be a parental board which will share control and champion the JV.  Parents must recognise that the JV is not an off-shoot but an entity in its own right.
  • Pre-launch strategy for the JV is not the same as post-launch strategy.  The leadership team must be allowed and enabled to build the strategy in a great deal more depth than that agreed at the deal point.  It is likely that they will even create an alternative vision for the JV.  They should not be constrained by the emerging strategic conflicts that arise from the parents.  The leadership team should not need to hunker down in parental cross-fire.
  • Parental communication is critical.  The leadership team will need to manage the parents’ goals and objectives.  Methods to establish frequent clear, coherent and common communication with all parents needs to be agreed early and then maintained.

Cultural Differences

  • The independent JV will not share the same culture as any one of its parents.  It will develop and shape its own identity and personality.  Whilst the new culture of the JV can not be ‘set’ in advance, the leadership team will need to shape the new culture by placing the parameters in advance, living and working within them and defending them form ‘re-placement’ by the parents.
  • Frequently, a JV will be established by individuals on secondment from the parents and by teams of consultants.  These groups have a very different approach to the JV, and to the way they work, compared with the future JV employees.  Care must be taken to ensure the ‘early temporary workers’ do not set the culture for the future JV.
  • Have you established the value proposition for future JV employees?  Why would good people want to join the JV team?  There are a variety of approaches to gain the commitment, engagement and drive of the JV team (inspirational CEO, advantageous packages, future accelerated preferment, broaden experience).  Some of these may be in direct conflict to the policies of the parents.

Operational Factors

  • Identify clear first year objectives for the JV which are realistic and understood by parents.  Within this there is often a need to manage the parental pressure to deliver unrealistic first year results.  The objectives will include business performance and other key performance goals, but should also include other factors ranging from establishing the JV behaviours to shaping the JV identity.
  • The independent JV will need to establish its own reporting systems, processes and metrics.  These should not be inherited from a parent, however strongly they believe in the rightness of their approach.
  • Carefully define and review the service provision offered by parents so as to avoid conflicts and issues associated with the venture economics.  Recognise also that the delivery of such services will not be through the individuals who originally agreed the deal, consequently there will be political issues at the boundaries between the parents and the JV.  These will need to be identified and resolved.